Friday, September 28, 2012

George Washington, the 1st president of the United States of America, died in 1799. Some reports say that doctors applied leeches to the father of our country as he suffered in his final days. Today, doctors don’t use medical “wisdom” from the 18th century to help their patients.

Lately, I have been hearing the same argument regarding economics. Scotsman Adam Smith published THE WEALTH OF NATIONS IN 1776 which most students of history of economic thought would say contains the first outline and spirited defense of the capitalistic system. Why do, many ask, economists and a few politicians hark back to early thinking developed in the 18th century or the industrial revolution of the 19th century? They get angry when anyone argues that government may be the problem and rarely the solution. I agree with that up to a point. Yet, to me, certain economic truths have more to do with human nature than theory. Greed, envy, competition, technology and progress were with us in 1776 and remain with us today. They dominate human action, which is how noted Austrian economist Ludwig von Mises described economics.

For most of the 20th century, the Keynesians slugged it out with the Austrians and the Monetarists. John Maynard Keynes of Britain argued for government deficit spending during weak economic times. The Austrians approved of a laizzez faire approach and letting the economy heal itself by getting rid of malinvestment. The Monetarists said proper control of the money supply would control inflation. During the great depression all the way up to the Reagan Revolution of 1980, the Keynesians dominated. Then the Monetarists and the Austrians, both ardent defenders of the free market began to take center stage. After the onset of The Great Recession, a Keynesian approach of massive government stimulus came roaring back in to our lives. Now countries across the world are printing vast quantities of money at different levels. This is unprecedented in measured economic history. All I can say is that once you start printing it is very, very hard to stop

Through it all, no matter which school of thought dominated, all basically spun their theories on the concept that consumers acted rationally. Yet, by even cursory observation, we see people daily who are not making rational decisions. Some 20% of Americans are morbidly obese and studies of recent vintage indicate that such a sorry statistic could double over the next 20 years. Is putting your health in harm’s way a rational act?

Behavioral economics (see Media Realism, 3/22/11) is a new discipline that is a marriage between psychology and economics. It studies how people often use rules of thumb from their own experience or copy the behavior of others rather be the classic “economic man” and act rationally. Increasingly economists are saying that when people are irrational the government should intervene.

All this seems to be leading to what a few people have dubbed as “fusion economics.” There will be a pick and mix approach among the schools of economics. If people won’t act rationally, a series of paternalistic regulations will take hold to help people make decisions that are truly in the public’s long-term interest. (For example, the risky mortgages that many took out in the first decade of this century would be prohibited. People would not lose homes in the future as a result of irrational decisions)

For two centuries, economists of nearly all stripes had boundless faith in the ability of markets to determine outcomes. Now, many of us are questioning whether markets always come up with the preferred outcome. Sounds great but who determines what THE preferred outcome is? The current crop of bureaucrats, perhaps? Fusion economics will not have a core philosophy. Taking one policy from the Keynesians, the next from the Monetarists and sprinkling in a bit of Austrian freedom seems like an odd mix to me although I do find Behavioral Economics fascinating.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Saturday, September 22, 2012

On 11/7/2010, I put up a post that was entitled “Women on the Rise.” It discussed demographic trends in the US and some Western economies. With more women graduating from college than men, getting advanced degrees and entering law and medical schools it was inevitable that 15 years from now women would be leaders in law, medicine, business and academia. At the end of the piece I referred to an article in the Atlantic by Hanna Rosin called “The End of Men.”

Very recently, Ms. Rosin has expanded that article into a book of the same name (Riverhead Books, 2012). It is a fascinating read and her treatment of a very complicated and, at times, delicate subject, is very well done.

Why do things seem to be shifting in women’s favor? Ms. Rosin’s thesis seems to be that as the world has changed, women are more flexible than men. Importantly, as we have moved in to the information age, the service oriented economy is far more welcoming to women than the industrially dominated economy ever was. It is an interesting thought and, as you drill down in the details and demographics, the case is very well made.

She also talks of 60% of college graduates now being women. That, by definition, means that many good positions have to go to women in the future. She does not explain why young women seem more organized than young men and plan their careers with care while millions of young American males just seem to drift. Over the next decade this will cause an imbalance in society that we have never seen before. Women will be dominating in many fields with key senior positions. She guesses that high finance may be the last of the “old boy network” bastions to fall. More women may not ever marry as they are both very career driven but also will discover a distinct shortage of men who are similarly educated and sophisticated.

The top-line statistics regarding men are indeed a bit scary. In 1950, five percent of men in their prime earning years were not working—today, it is 20%
which is indeed ominous. In 1970, women contributed 6% of the family income while today it is 42.2%. That last statistic to me is a reflection of economic necessity not just the advance of women. Almost all two income households have two incomes simply because it is necessary economically.

Critics have said that Ms. Rosin overstates things. Why are only 3% of Fortune 500 companies headed by women? Why are only 20 of the 180 global heads of state women? Sadly, they miss the obvious—demographics. Today, the pipeline is being filled with women college graduates and those with professional degrees. Fast forward a decade or two and women will be far more dominant. Demographics, as I have said in this space before, are destiny. This tidal wave would take a generation or two to reverse and, to do so, young men would need to get far more motivated than many are now.
Others say that this is just a blip. The real gloom and doomers have said that the men have been fired first in our long running economic malaise and the women will be next. Again, they miss the demographic certainty that is firmly in place. If three women for every two men graduate from college each year, then more women will be tapped for senior positions than men in the future.

Ms. Rosin has a somewhat rosy view of globalism and states again, with women being more flexible than men, they should do relatively better as certain industries shift overseas. I am not at all sure about that hypothesis. Globalization is terrific for the consumer but some people always get hurt in the transition and women may be equally affected as men.

Overall, this book is modestly upbeat unless you are a 23 year old man who dropped out of college. If you want to get depressed, read “The Decline of Men” by Guy Garcia. Written about four years ago, he says that millions of young adult men are spending way too much living in their parent’s basements playing video games, analyzing fantasy football leagues, watching lots of ESPN and some pornography as well. At the same time, an increasing number of young women are planning their futures with care. His solution appears to be that men should get in touch with their feminine side and be more sensitive and communicate better. My advice to these young fellows is to get off the couch!

Ms. Rosin’s book is timely and well done. It reminds me how marketers have to start shifting gears with their advertising messages. As more women earn six figures they will not be only the primary breadwinner in many households but also the decision-maker as well in any number of categories. Sales people will have to adjust as these successful women will be very pressed for time. Mobile advertising will likely play a very prominent role with these high achievers. The die is cast demographically. There is no turning back on this trend over the next few decades. The odds will get stronger each year that your doctor, your lawyer, your financial advisor, and your best customers will be women. Now we will need appropriate ad copy and media placement to reach them.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Thursday, September 13, 2012

Last year, I ran in to a former student. He was waxing poetically about his job and I was happy for him and proud to have played a small part in his success. As time went on, he spoke with increasing excitement about his company and what it was doing. Then, he asked me for advice. I told him that things were apparently going great for both him and his employer but I reminded him to try and keep some perspective on things. My exact line was “Remember, don’t drink the company Kool-Aid.”

The line is used frequently in North America these days. It refers to a horrible scene in Guyana in 1978 when Rev. Jim Jones along with many followers drank Flavor-Aid laced with cyanide and took their lives. Since then, it has morphed in to “Don’t drink the Kool-Aid” meaning that you should never have unquestioning belief in any company or movement. Some degree of critical examination is always required.

As I think back, I can honestly say that I was never a Kool-Aid drinker. Every place that I worked had strengths and each had shortcomings. But I never ignored the flaws of management or the weaknesses of some personnel or departments within each organization. Some of it I shared with superiors, some I discussed with trusted associates, and much I will simply carry to the grave.

I am not suggesting that you be a malcontent or a cynic. No organization is perfect and none of us are perfect employees. But, if you can stay a bit detached you usually work better. Disappointments are few as you expect less than the true believers. You can simply do your absolute best and not worry about it. If another opportunity comes along, you are more likely to give it balanced consideration, as you are not in awe of your current management. You realize that the grass may be greener or just different somewhere else.

People are forever telling me that their team or company or organization is the “best in the business.” I just smile. Some are indeed awfully good but everyone cannot be the best. And, it is important to have a certain pride in the organization that you belong to and the people with whom you work. But, if you drink the corporate Kool-Aid, you will likely begin to rationalize things sooner or later. Statements like “we are not overcharging, we are worth it” start popping up. Or “that client is an idiot and we know better” meets only with nods of approval. At that point, you need a reality check. Is this place ethical? Are we turning out a shoddy or dangerous product or possibly bending the truth more than a little but rationalizing it as we all drink from the company fountain?

In today’s world, you cannot just leave in a huff. There are mortgage payments, college bills, healthcare expenses, and not a great many really terrific available positions. If you try to stay detached and objective, your career decisions will be better, you can live with yourself and most likely will not be bitter in old age.
Being loyal to your employer is a very positive. Being blind to obvious shortcomings is not.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Thursday, September 6, 2012

Over the last few years as Media Realism has grown we have reached a point where, in many weeks, more than half the readers are from outside North America. Geographical readership tends to very topic sensitive but the European and Asian growth in particular has been steady.

Recently, some readers from emerging nations have written to me asking which countries that I look at to monitor marketing opportunities and a growing media presence.

The knee jerk reaction for most people would be the BRIC nations—Brazil, Russia, India, and China. Russia, to me, is mostly driven by natural resource wealth so I do not follow it terribly closely. China has a long-term demographic problem and India a demographic upside but they are both so huge that I do not spend nearly as much time on them as I once did.

My choices may be sharply different from yours. They are Brazil, Turkey, and Vietnam. While they are wildly different in geographic location, to me they have some common threads that merit my close observation.

Brazil, after decades of being an economic basket case, is now the eighth largest economy in the world. They are easily the largest consumer market in Latin America and their middle class now numbers over 100 million people. They are energy self sufficient with sugar based ethanol and five years ago, some huge offshore oil discoveries have sent major energy companies south vying for a piece of the action.

More importantly, Brazil has a wide array of trading partners. For most of the 20th century, the US was the dominant foreign player in Brazilian trade. Now, they are very well diversified and China is currently Brazil’s largest trade partner. They seem to have a portfolio of trade partners and unlike past history, are not overly reliant on any one nation. So, no matter how things may develop in world economic power over the next decade or so, they are in a nice spot with friendly relations with many entrenched and emerging players around the globe. Also, they will not waste money on war. There are no plans for a Brazilian nuclear weapons program. There is still corruption and some organized crime but it is not the tinderbox of tension that you see elsewhere around the globe.

My second choice, Turkey, also has many trading partners. They badly want to join the European Union but only a small percentage of the country is geographically in Europe. The real impediment is that other E.U. member states appear not to want a new member state that borders such sensitive areas such as Syria, Iraq, and Iran. Turkey has a fairly solid economy that, surprisingly, is four times the size of Egypt. They also have a good historical trading partnership with Israel which is unique in the Muslim world. Also, they have NATO membership that makes them something of a player with the US and most of Europe.

Over the last few years, I have observed a few Turkish package goods companies being bought out by global behemoths. The indigenous Turkish brands were competing quite effectively so a buyout was a workable solution for large international players to get a foothold.

Geographically, Turkey is in a unique spot at the crossroads of the old Soviet Union, the Middle East, Europe and Asia. Per capita income is almost twice that of China and four times India so an emerging middle class will have significant buying power going forward.

Vietnam may seem like the outlier on my list. For someone of my generation who spent a few anxious months wondering whether I would be sent there in 1971-1972, it is strange to be discussing it as an emerging economic powerhouse. Many people see Vietnam as simply a captive of China. As wage rates have increased in many parts of China, Vietnam has benefited as manufacturing has moved towards their eager and efficient work force. If China has difficulties long term, does this mean that Vietnam is toast? No, not at all if they can work with and trade with far flung neighbors as Brazil and Turkey have. Media wise, the Vietnam press and broadcast entities are still government controlled and laced with Marxist-Leninist rhetoric but that seems to have little effect on production or the emerging middle class.

Each of you probably has your own list that you personally monitor. I would assume Indonesia, with the world’s 4th largest population, would be near the top for many of you. My point today is merely to give you my spin on an issue that any international marketer or investor needs to work on regularly.

Which nations are on your list? I would love to hear from you.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

About Me

Don Cole has been a media analyst for over 40 years. He was a media director and partner at Doner and Moroch and worked at two other agencies plus Arbitron.
His focus with this blog will be to discuss the rapid changes going on in the advertising industry and especially its impact on broadcast TV, cable TV, and mid-sized and smaller ad agencies.
Don is available to consult or to speak to your organization on a wide variety of topics.